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CBN to Maintain Forward Guidance as Policy Tool



  • CBN to Maintain Forward Guidance as Policy Tool

Following the Senate’s refusal to consider President Muhammadu Buhari’s nominees to fill the vacancies in the Monetary Policy Committee (MPC), the Central Bank of Nigeria (CBN) has decided to hold on to forward guidance to communicate its monetary policy intentions pending the resolution of the dispute between the legislature and the executive arms of government.

The suspension of confirmation of the nominees by the Senate has made it impossible for the MPC to form a quorum and could, therefore, not meet to take up its role of monetary policy guidance.

A senior central bank official disclosed this yesterday.

Forward guidance is a verbal assurance from a country’s central bank to the public about its intended monetary policy. It attempts to influence the financial decisions of households, businesses and investors by letting them know what to expect from interest rates (to the extent that the central bank can influence those rates). The central bank’s clear messages to the public are one tool for preventing surprises that might disrupt the markets and cause significant fluctuations in asset prices.

The first MPC meeting for 2018, which would have held last month did not hold. But in the absence of the meeting, the CBN had announced its decision to continue to retain the key monetary policy variables as decided by the MPC at its last meeting in November 2017.

The CBN source explained: “There would be forward guidance. The management of the central bank will continue to issue forward guidance.

“If you remember there was a time in this country when MPC wasn’t statutory, the economy was running, and the central bank was issuing forward guidance.

“So, there is no problem, the central bank will continue to issue forward guidance. I don’t think the emergency meeting will hold.”

Media reported last November that eight positions in the 12-member committee were vacant, making it impossible for the committee to form a quorum.

Media had also reported about a fortnight ago that the Senate was not budging on its resolve not to consider the MPC nominees.

The lawmakers had maintained that they would not confirm any nominee by the executive until the impasse regarding the nomination and non-confirmation of the acting chairman of the Economic and Financial Crimes Commission (EFCC), Mr. Ibrahim Magu, was resolved.

The lawmakers also said the Senate had resolved to seek a legal interpretation of a comment made by Vice-President Yemi Osinbajo that the position of the EFCC chairman did not require the confirmation of the Senate, as it was not specified in the constitution.

As a result of Osinbajo’s remark, the Senate had resolved to suspend the confirmation process for all nominees of the president not specifically mentioned in the 1999 Constitution, but are provided for in the establishment Acts of several agencies of the federal government such as the CBN, FIRS, NCC, and others.

Commenting on the decision by the CBN to issue forward guidance, the Director General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, described it as a temporary arrangement, saying the central bank was in a dilemma.

Ekpo, who is a former MPC member added: “This so-called forward guidance is very temporary. It is an attempt to fill a yearning gap. But to me, it is not the best thing to do. But currently, the central bank cannot do anything, and you can’t blame the CBN for trying to find a way out.

“I wish this matter can be resolved. The stalemate is very sad. They are playing politics with the economy and it is very unfair. When you create uncertainty in the system, the foreign investors we are looking for may be discouraged. In most countries, the MPC is the engine room. If they cannot meet because of lack of quorum, it is very unfortunate.

“I thought the National Assembly should realise that they are not attacking President Muhammadu Buhari as a person, what they are doing is affecting the national economy.”

The CBN Governor, Mr. Godwin Emefiele, had last month announced that the benchmark monetary policy rate (MPR) was retained at 14 per cent, the cash reserve requirement at 22.5 per cent, liquidity ratio at 30 per cent, while the asymmetric corridor retained at +200 and -500 basis point around the MPR, as decided at the November meeting of the MPC.

He stressed that the central bank would remain proactive and vigilant in ensuring that macroeconomic stability was maintained.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

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Debt Market: Dangote Cement Raises N250 Billion in H1, 2020



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Dangote Cement Raises N250 Billion From Debt Market in H1 2020

Dangote Cement raised a total sum of N250 billion from the nation’s debt market in the first half of the year, according to the FMDQ Securities Exchange Limited.

In the statement published on the FMDQ website, the N250 billion debt includes the N100 billion Series 1 Bond raised under Dangote Cement’s N300 billion Bond Programme and the N150 billion Commercial Paper (Series 13-16 Domestic CP Issuance Programme) offered earlier in the year and now listed and quoted on FMDQ Securities.

Mr Michel Puchercos, the Chief Executive Officer, Dangote Cement, was quoted as saying, “This landmark transaction is the largest-ever bond issuance by a corporate issuer in Nigeria.

“It allows us to further broaden our sources of funding by accessing long-term debt at competitive costs from the capital market and builds further on the success of our domestic commercial paper programme.

“The success of these transactions, in the current challenging environment, illustrates investors’ continuous confidence in Dangote Cement’s strategy, strong cash generation and solid credit profile.”

Mr Kobby Bentsi-Enchill, the Executive Director and Head of Debt Capital Markets, Stanbic IBTC Capital Limited, said, “Stanbic IBTC Capital Limited has a long history of partnering with Dangote Cement Plc, and are delighted to have advised on this landmark corporate bond issuance, which reflects the depth and diversity of the Nigerian debt capital markets.”

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Conoil Profit After Tax Declines by 20 Percent in Q1, 2020




Conoil Profit Before Tax Depreciated by 20 Percent in Q1 2020

Conoil Plc, Nigeria’s indigenous oil marketing company, on Tuesday declared a 20 percent declined in both profit before tax and profit after tax for the quarter ended March 31, 2020.

In the unaudited financial results released on the Nigerian Stock Exchange (NSE), Conoil grew revenue by 7 percent from the N35,637 billion filed in the same quarter of 2019 to N38.143 in the first quarter of 2020.

Also, the company’s retained earnings expanded by 8 percent from N14.395 billion in the corresponding quarter of 2019 to N15.556 billion in Q1 2020.

Accordingly, Shareholders’ funds appreciated by 6 percent from N18.566 billion filed in the first quarter of 2019 to N19.728 billion in the same quarter of 2020.

However, profit before tax declined by 20 percent from N468,202 million in Q1 2020 to N382,915 million during the period under review.

The tax paid by the company during the period also declined by 20 percent from N153,025 million in Q1 2019 from N122,533 million in Q1 2020.

The company’s profit before tax declined by 20 percent from N325.178 million in achieved in the first quarter of the corresponding year to N260.382 million in Q1, 2020.

Similarly, earnings per share also declined by 20 percent from 47 kobo in Q1 2019 to 38 kobo in Q1 2020.

Total assets declined from N63.584 billion in Q1 of 2019 to N58.760 billion in Q1, 2020.

Conoil owned equity expanded from N19.467 billion achieved in the first quarter of 2019 to N19.728 billion in the first quarter of 2020.

Total Liabilities declined from N44.117 billion in Q1 2019 to N39.032 billion during the period under review.

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FMDQ Group Admits Dangote N100bn Bond, MTN N100bn Commercial Paper



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FMDQ Group Admits Dangote N100bn Bond, MTN N100bn Commercial Paper

The FMDQ Group has said the admission of both the N100 billion Dangote Cement bond and MTN Nigeria N100 billion commercial paper shows the potential of the Nigerian capital market to drive and stimulate economic growth.

The two most capitalised companies successfully raised N100 billion each from the capital market despite the COVID-19 pandemic and economic downturn.

Bode Onadele, the Chief Executive Officer, FMDQ Group, said: “The market has been yearning for corporate benchmarks for pricing and valuation of securities in the debt capital market, and coming at a time when the resilience of the Nigerian financial market is being tested by the impact of the COVID-19 pandemic is even more commendable.

The success of these issuances by the premier and largest business conglomerate in Africa, Dangote Industries, through its subsidiary, Dangote Cement Plc, and the debut made into the Nigerian debt capital market by leading telecommunications giant, MTN Nigeria Communications Plc, lay credence to the untapped and great potential of the Nigerian capital market to support sustainable development in Nigeria, and the confidence of investors, as well as the commitment of FMDQ Group to empower the markets to deliver prosperity to Nigeria and Nigerians.”

Onadele said the inclusion of the two securities on FMDQ validates the innovative and credible capital market solutions championed and efficiently delivered by FMDQ, over the last few years.

“Furthermore, in line with its mandate to facilitate global competitiveness of the Nigerian financial market, FMDQ, through these admissions, has provided the market and its diverse stakeholders – local and international – the much-needed corporate benchmark for the bond and commercial paper markets,” he said.

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